Financial Post, Weekly edition,
Wed 29 Jun 94,
page 9

Keywords: Foreign aid
International finance
Monetary policy
World

G-7 mulls US$50B plan to boost world economy

Reuter

Leading industrial nations are discussing a multi-pronged
plan to pump billions of dollars into the world economy and aid
Russia and the other former Soviet states, international monetary
sources said yesterday.

But it is not clear whether the Group of Seven - Canada, Britain,
France, Germany, Italy, Japan and the U.S. - will be able to hammer
out an agreement in time for their annual summit next week.

The plan has a little bit of something for everyone, although
Russia will likely be the country to benefit most. The proposal has
the added benefit of making use of resources from the International
Monetary Fund.

Under the plan, the IMF would act to build up foreign exchange
reserves of all 177 member nations through a general issue of its
artificial currency, the Special Drawing Right.

The SDR issue would strengthen the financial underpinnings of IMF
member nations and give them extra borrowing power - of particular
importance to developing nations and former communist countries.

IMF Managing Director Michel Camdessus has proposed a 36-billion
SDR issue, worth about US$50 billion, but the G-7 is unlikely to
agree to such a large allocation, sources said.

The plan would also include a "catch-up" SDR issue to a selected
group of nations.

Sources said all G-7 countries support the catch-up SDR issue in
principle, but they are divided over the general allocation. In a
shift of policy, Washington has signalled it might be willing to
accept a small, general SDR issue.